The start of a Santa Rally or more 'bah humbug'?

And just like that… December is upon us.

It’s been a volatile handover from November with U.S. major indices underperforming, dragged down by steep declines for the Nasdaq. Europe’s Stoxx 600 managed to hold onto gains, making November the fifth positive month in a row. But tech stocks also suffered, as concerns over AI valuations and spending plans played out across global stock markets.

So what does this mean for December — can stocks stage a seasonal Santa Rally, or will it be more ‘bah humbug’ in the final trading month of the year?

Macy’s Santa Claus is greeted by traders on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., Nov. 26, 2025.

Brendan Mcdermid | Reuters

The case for a Santa Rally

Fidelity International crunched the numbers: The FTSE 100 has delivered a positive return during December in 24 out of the last 30 years. There could be some festive cheer for the U.K. this year, with markets pricing in a 90% chance the Bank of England will cut the interest rate in December after the budget was seen as avoiding any seriously inflationary measures.

It’s a different picture for the European Central Bank, where markets see zero chance of a cut, but this is also seen as a positive sign as the governing council said policy is in a “good place” in their last set of minutes. European and Asian stocks have tracked the U.S. higher each time expectations rise for a cut at the next Federal Reserve meeting in December, with a near-83% chance of a reduction now expected by markets, according to CME Fedwatch.

The central banks could help bring the festive spirit this December.

The ‘bah humbug’ case

But there are market forces that could leave the bulls finding a lump of coal in their stocking. The drivers behind the volatility in November have not magically disappeared, with some investors and market watchers still voicing concern over the pace of AI hyperscaler spending. Even the ECB made the usual move this week of warning that U.S. tech valuations are stretched because investors have FOMO, “fear of missing out.” The central bank warned of “sharp correlated price adjustments” as a key risk for AI-driven stocks.

ECB’s De Guindos: High valuations a key risk to financial stability

Crypto could also be a drag in the final month of the year. As CNBC reported last week, Compass Point predicts bitcoin will continue declining as newer investors sell the token and exchange-traded-funds tied to it. Compass also suggests long-term holders could sell down their holdings due to the “halving” schedule, which happens every four years and “programmatically cuts in half the amount of rewards individuals get for mining new tokens on the bitcoin blockchain.”

Why the pressure on bitcoin may linger into year-end

Whether you believe in the Santa Rally or not, December will cap a fascinating year for asset classes across the globe, and make 2026 predictions tough to call.